Category: Stock Market

There are some ASX shares that fundie Wilson Asset Management (WAM) really likes at the moment.

WAM is a fund manager that operates a variety of listed investment companies (LIC) that run a variety of different strategies.

It operates: WAM Capital Limited (ASX: WAM), WAM Leaders Ltd (ASX: WLE), WAM Global Limited (ASX: WGB), WAM Microcap Limited (ASX: WMI), WAM Alternative Assets Ltd (ASX: WMA), WAM Research Limited (ASX: WAX) and WAM Active Limited (ASX: WAA).

Each month WAM outlines some of the ASX shares that it has a bullish opinion about across its portfolios.

Here are some of the ASX shares that the fundie likes right now:

Nuix Limited (ASX: NXL)

WAM Active described Nuix as a business that’s a leading provider of investigative analytics and intelligence software, with over 1,000 customers in 78 countries utilising the software to manage cyber security risk, compliance and fraud.

Originally, the company begin in the early 2000s with the development of an algorithm to search unstructured data.

As of today, the Nuix platform is underpinned by more than 15 years of research and development, with over $200 million of research and development costs incurred since 2008.

The effectiveness of Nuix’s software has led it to be used in the investigation of headline events including the ‘Panama Papers’ and the royal commission into misconduct in the banking, superannuation and financial services industry in Australia.

The ASX share is headquartered in Australia with 421 employees. However, approximately 80% of the company’s $175.9 million revenue that was generated in FY20 came from overseas.

There was some keen investor interest in Nuix when it first listed, with the Nuix share price rising 50% on its first day of trading. It now has a market capitalisation of $3.1 billion.

Serko Limited (ASX: SKO)

Serko is a New Zealand based online travel booking and expense management company for the business travel market.

Wilson Asset Management said that the ASX share has benefited from an uplift in travel and the state by state reopening of borders between New Zealand and Australia.

Serko said in its recent FY21 half-year result for the six months to 30 September 2020, total operating revenue of NZ$5.1 million was down 65% because of COVID-19 pandemic travel disruptions.

Half-year total travel booking volumes for the company during the period were down 77%, being 23% of the volumes in the same period a year ago, but have since risen to 35% for October (New Zealand at 76% and Australia at 26%).

However, the percentage of transactions occurring on its premium Zeno platform continues to increase, representing around 38% of online transactions in September, up from 25% of online transactions at the end of March 2020.

The bottom line was a net loss after tax for the period of NZ$10.1 million compared to a net loss of NZ$0.9 million in the prior period due to lower revenues and Serko investing in expansion into the Northern Hemisphere ahead of an anticipated travel market recovery.

Whilst there was an average net cash burn of $1.8 million per month for the six-month period by the ASX share, it was within the $2 million COVID-19 cost saving cap set by the company. After the recent capital raising, Serko had over $90 million of cash on hand at the time of releasing the report, which management said positioned the company well for an anticipated travel market recovery.

More reading

• Forget GameStop and buy these fantastic ASX growth shares
• Brace for an IPO resurgence as new floats beat the ASX 200 by ~50%
• Revealed: ASX company underpaid staff $2.3 million
• 2 stellar small cap ASX shares rated as buys
• Wilson Asset Management thinks these 2 small cap ASX shares are a buy

Tristan Harrison owns shares of WAM MICRO FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Serko Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Nuix Pty Ltd. The Motley Fool Australia has recommended Nuix Pty Ltd and Serko Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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 There are some blue chip ASX shares rated as buys by brokers.

It can sometimes be worth taking into account what brokers think because they are constantly looking at which shares look good value and what investments could make money. They have access to research and tools that many retail investors don’t.

Here are two blue chip ASX shares that brokers really like:

Australia and New Zealand Banking Group Ltd (ASX: ANZ)

The big four ASX bank share is rated as a buy by at least six brokers.

There have been a number of factors that brokers like about the major banks right now.

Credit Suisse has pointed out that one catalyst for the banks providing better returns for shareholders is the Australian Prudential Regulation Authority (APRA) ending the requirement for Australian banks to hold onto at least 50% of their statutory earnings.

There are other catalysts for the big banks according to brokers. The concerns about the Australian economy are dissipating and the news of the effectiveness of COVID-19 vaccines has seen a shift to value ASX shares, such as the big banks.

Australia’s strong house prices could be helpful for the banks in ensuring that bad debts don’t become too significant. There will also be the benefit of the credit provision top-ups not being repeated again.

Some brokers, such as Citi, believe that ASX bank shares’ net interest margins (NIM) won’t decline any further and that the market may still be too negative about the big banks’ upcoming results.

According to Commsec, the ANZ share price is valued at 13x FY22’s estimated earnings. Commsec also has an estimate of an annual dividend of $1.20 per share for FY22, which equates to a grossed-up yield of 7.25%.  

Brickworks Limited (ASX: BKW)

Brickworks is rated as a buy by at least six brokers.

This ASX share is a market leader of bricks in Australia. It has a number of brick brands including Austral Bricks, Bowral Bricks and Daniel Robertson.

It also sells other products like pavers, masonry, stone, roofing, specialised building systems, precast and cement. It’s represented in these categories by businesses like Austral Masonry, Urban Stone, Bristle Roofing, Terracade, Pronto Panel and Austral Precast.

In a recent trading update, Brickworks said that its Australian building products division has made a strong start to FY21 with first quarter earnings well ahead of the prior corresponding period.

Brickworks also has an American building division after making some acquisitions like Glen Gery. The company is already the market leader in the north east of the US. It has long-term growth plans there and wants to increase efficiencies across its manufacturing network. COVID-19 is hurting short-term growth, with sales below expectations in recent months. This is partly due to the deferral of projects. 

The ASX share also has two other assets.

Brickworks owns around 40% of investment conglomerate Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) which has steadily grown earnings and dividends for Brickworks. Soul Patts has a diversified portfolio in sectors like telecommunications, resources, listed investment companies (LICs) and agriculture.

The other main asset that Brickworks owns is a 50% stake of an industrial property trust alongside Goodman Group (ASX: GMG). This joint venture trust builds industrial properties like warehouses on Brickworks’ excess land that it no longer needs.

At the moment the trust is building two huge warehouses, one for Coles Group Ltd (ASX: COL) and one for Amazon. These buildings show that Brickworks can gain exposure to the e-commerce and logistics trend.

Once the two warehouses are completed over the next couple of years, it’s expected that the profit distributions to Brickworks will increase by at least 25% and the gross assets of the trust will rise above $3 billion.

More reading

• 2 ASX shares rated as strong buys by brokers
• Jailing of NAB exec a scary déjà vu for NAB (ASX:NAB) share price
• ASX 200 down 2.3%: Bank shares tumble, InvoCare jumps, IOOF disappoints
• 2 top ASX dividend shares to buy in February
• 3 ASX dividend shares to buy in February 2021

Motley Fool contributor Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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While it could be tempting to jump on the bandwagon and buy GameStop shares, it would be a dangerous game to play.

This is because when Reddit is finished with the games retailer, the buying pressure is likely to fade and its shares will trend towards their true value. Something which experts believe is significantly lower than where it trades today.

In light of this, these ASX growth shares could be the ones to buy if you’re looking to build your wealth. Here’s why:

Nuix Limited (ASX: NXL)

The first growth share to look at is Nuix. It is a leading provider of investigative analytics and intelligence software. Nuix helps customers across the globe to process, normalise, index, enrich, and analyse data from different sources.

The company has a very strong reputation for good reason. Its software has played a key role in some of the most important investigations over the last decade. This includes the Panama Papers and the Banking Royal Commission.

Nuix has been performing very positively over the last 18 months and doesn’t appear to have had its growth stifled by the COVID-19 crisis. In FY 2020, the company delivered a 25.9% increase in total revenue to $175.9 million. This was driven largely by its subscription revenues, which now account for 88.7% of its total revenue.

One broker that is a fan of the company is Morgan Stanley. Earlier this month it put an overweight rating and $11.00 price target on the company’s shares. It believes Nuix is an attractive, long term, structural growth story.

Xero Limited (ASX: XRO)

Xero is one of the world’s leading cloud-based business and accounting software platform providers.

It has been growing at a very strong rate over the last few years and even during the pandemic, despite its impact on small businesses.

For example, during the first half of FY 2021, Xero’s subscriber numbers increased to 2.45 million. Thanks to this and an increase in average revenue per user, Xero reported a 21% increase in operating revenue to NZ$409.8 million and a 15% lift in annualised monthly recurring revenue (AMRR) to NZ$877.6 million.

Goldman Sachs has been impressed with its performance and believes it still has a very long runway for growth.

It recently initiated coverage on the company with a buy rating and $157.00 price target. Goldman believes Xero can achieve a 2030 subscriber footprint of 7.4 million and generate NZ$3.4 billion in annual revenue.

After which, it sees opportunities for Xero to monetise its app ecosystem and drive multi-decade strong growth.

More reading

• Brace for an IPO resurgence as new floats beat the ASX 200 by ~50%
• ASX 200 drops 2%, IOOF and Afterpay shares sink, Bubs jumps
• 2 fantastic ASX tech shares to buy in February
• 3 of the best ASX shares you can buy today
• 5 things to watch on the ASX 200 on Monday

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Xero. The Motley Fool Australia has recommended Nuix Pty Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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On Tuesday the Reserve Bank of Australia will be holding its first meeting of the year to discuss the cash rate.

According to the latest cash rate futures, the market is currently pricing in a 75% probability of a cut to zero.

Whether or not a cut comes, we’ll find out on Tuesday, but one thing that is for sure, is that interest rates are going to be at very low levels for some time to come.

In light of this, ASX dividend shares look likely to be the best way to earn a passive income for some time to come.

With that in mind, I have picked out two ASX dividend shares with attractive yields. They are as follows:

National Storage REIT (ASX: NSR)

National Storage is one of the region’s largest self-storage operators. From over 190 locations across Australia and New Zealand, the company tailors self-storage solutions to thousands of residential and commercial customers.

The good news is that the company still sees plenty of room for growth in the future. In fact, since the end of FY 2020, the company has completed eight acquisitions totalling $139 million, has an acquisition pipeline that remains strong, and a number of development projects underway.

In respect to dividends, management advised that it expects to report underlying earnings per share of 7.7 cents to 8.3 cents in FY 2021. It also plans to pay 90% to 100% of its earnings out to shareholders as distributions.

Based on the middle of both guidance ranges, this equates to a 7.6 cents per share distribution. And with the National Storage share price trading at $1.91, this represents a 4% yield.

Wesfarmers Ltd (ASX: WES)

This conglomerate has been a very positive performer over the last 12 months. This is thanks largely to its key Bunnings business, which has delivered very strong sales growth despite the pandemic.

In fact, according to a note out of Goldman Sachs this month, it expects the home improvement business to report a 22.3% increase in revenue to $8,899.4 million for the first half. This is expected to underpin a 12.7% in group net profit to $1,269.8 million, allowing the Wesfarmers board to declare an interim dividend of 84.1 cents per share.

For the full year, Goldman Sachs estimates that Wesfarmers will pay a 162 cents per share fully franked dividend. Based on the latest Wesfarmers share price, this will mean a 3% dividend yield.

Though, it is worth noting that Credit Suisse is forecasting a larger dividend of $1.90 per share for FY 2021, which works out to be a more generous 3.5% yield.

More reading

• What to expect from the Wesfarmers (ASX:WES) first half result
• Wesfarmers (ASX:WES) share price climbs to new record high
• These blue chip ASX shares just hit multi-year highs
• Why ASX travel shares like Webjet (ASX:WEB) fell lower on Monday
• 3 top ASX blue chip shares to buy

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The two infant formula ASX shares in this article could be worth looking at after their share prices have dropped heavily over the last six months because of COVID-19.

There are some industries that have seen enormous growth such as e-commerce with ASX shares like Kogan.com Ltd (ASX: KGN) and Temple & Webster Group Ltd (ASX: TPW) seeing significant growth.

However, there are other ASX shares that are still lower compared to where they were 12 months ago or six months ago. The infant formula industry is one of those sectors that still appears to be suffering.

Let’s look at two of them:

Bubs Australia Ltd (ASX: BUB)

The Bubs share price is down by 29% over the past six months.

If you’re not sure what Bubs does, it’s an integrated infant formula producer that is primarily known for its goat milk products. It also sells organic, gross-fed cow’s milk infant formula ranges, organic baby food, cereals and toddler snacks. It has a vitamins and minerals supplements range called ‘Vita Bubs’. Bubs also has a range of goat dairy products with exclusive milk supply from the largest milking goat herds in the country.

The infant formula ASX share recently released its trading update for the quarter ending 31 December 2020. In that ASX release, Bubs said that its quarterly gross revenue had gone up 36% compared to the first quarter of FY21, though it was still down 12% on the prior corresponding period.

China cross border e-commerce (CBEC) sales went up 27% quarter on quarter. Adult goat dairy gross revenue increased by 45% quarter on quarter. Bubs infant nutrition portfolio sales went up 27% quarter on quarter. Export sales to markets outside of China went up 194% quarter on quarter.

The infant formula ASX share also said that, according to IRI scan value sales data, Bubs Australia is the fastest growing infant formula manufacturer across Woolworths Group Ltd (ASX: WOW), Coles Group Ltd (ASX: COL) and Chemist Warehouse with combined retail scan sales at the checkout up more than 41% quarter on quarter and up 67% on the prior corresponding period.

Bubs also explained that the corporate daigou trade is softer than pre-COVID-19 levels but is up 122% on the first quarter of FY21.

A2 Milk Company Ltd (ASX: A2M)

The A2 Milk share price is down by 45% over the past six months.

The infant formula ASX share has been warning for some months that it was experiencing some difficulties as a result of COVID-19 impacts and much lower daigou buying activity.

Last month the company said that recent sales have not been as strong as it had been hoping. The daigou channel is important for stimulating demand across multiple channels, including CBEC. But the daigou channels sales have been disappointing. A2 Milk said that it intends to strengthen the focus on reactivating the daigou channel in the second half of FY21.

It wasn’t all bad in the business update. A2 Milk said that its Chinese label sales in mother and baby stores (MBS) remains very strong and it’s anticipating revenue growth in the first half of more than 40% compared to the prior corresponding period.

The rolling 12-month market share in MBS continues to increase – it had risen to 2.3% at the end of October, with increases in both same store sales and the number of new stores in the first half.

A2 Milk plans to continue its high level of investment in marketing of the rest of FY21.

The company also noted that its liquid milk businesses in Australia and the USA have performed well through the first half, with both businesses posting “strong” first half growth compared to the first half of FY20.

The company is now expecting revenue in the first half to be around NZ$670 million and an earnings before interest, tax, depreciation and amortisation (EBITDA) margin in the order of 27%.

For FY21 the company is expecting revenue to be in the range of NZ$1.4 billion to NZ$1.55 billion with the EBITDA margin to be between 26% to 29%. Over the medium-term, A2 Milk is aiming for an EBITDA margin in the order of 30%.

According to Commsec, A2 Milk is valued at 23x FY22’s estimated earnings.

More reading

• 3 ASX growth shares to buy in February 2021
• GameStop frenzy: 3 shorted ASX shares that could shoot up
• Why Bubs, Kogan, Lake Resources, & Western Areas shares are sinking lower
• 3 reasons why the Bubs (ASX:BUB) share price could be a buy
• ASX 200 drops 2%, IOOF and Afterpay shares sink, Bubs jumps

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia owns shares of and has recommended A2 Milk, BUBS AUST FPO, and Kogan.com ltd. The Motley Fool Australia owns shares of COLESGROUP DEF SET. The Motley Fool Australia has recommended Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Plenty of ASX tech shares are delivering high levels of growth. Some of them could be worth looking into for February 2021.

Here are some of those businesses that may be worth watching:

Redbubble Ltd (ASX: RBL)

Redbubble is an ASX tech share that’s focused on building its position as one of the world’s leading places for selling artist-produced goods. Independent artists sell everyday products like apparel, stationery, housewares, bags, wall art and so on.

Redbubble is focused on four key initiatives. The first is artist acquisition, activation and retention. Second, Redbubble is focused on user acquisition and transaction optimisation. The third focus is customer understanding, loyalty and brand building. Finally, further physical product and fulfilment network expansion is the last focus.

In the first quarter of FY21, Redbubble’s earnings benefited from a positive adjustment relating to delivery times. Excluding that positive adjustment, in the first quarter Redbubble saw marketplace revenue (paid) of $139.3 million, up 98%. Gross profit (paid) was $59.6 million, up 118%. Finally, earnings before interest and tax (EBIT) generated by Redbubble was $17.2 million.

Joseph Kim from Montgomery Investment Management said about the ASX tech share: “While Redbubble has clearly been a “stay-at-home” trade, we believe the business has the opportunity to emerge a longer-term structural winner from COVID-19 should it capitalise in the recent spike in user and customer interest as a result of recent lockdown measures.”

Kogan.com Ltd (ASX: KGN)

Kogan.com is another ASX tech share that continues to benefit from high levels of online shopping by consumers.

On Friday, the company delivered a business update for the first half of FY21.

Including the Mighty Ape acquisition, Kogan.com saw gross sales rise 96%, gross profit went up 120%, adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) grew by more than 175% and EBITDA went up by more than 140%.

Kogan.com finished the 2020 calendar year with just over 3 million customers. Mighty Ape had another 719,000 customers itself.

Technology businesses can benefit from economies of scale and achieve higher profit margins. In FY17, Kogan.com’s EBITDA margin was 4.3%, it rose to 6.3% in FY18, climbed to 6.9% in FY19 and grew to 9.3% in FY20.

The company is proud of its growing membership base as well. Mr Kogan, the founder of the company, spoke about the benefit to the company of its growing number of people using its loyalty scheme at the FY20 result: “The Kogan First community of members grew exceptionally during the second half, and importantly these loyal members on average purchase and save much more often than non-members, demonstrating loyalty to the platform, and also demonstrating the significant savings and other benefits available through the loyalty program.”

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is an ASX tech share that essentially services the US faith sector, particularly large and medium US churches.

It provides a donor management system, including donor tools, finance tools and a custom community app, as well a church management system.

Pushpay also owns Church Community Builder, which provides a software as a service (SaaS) church management system predominately in the US and other jurisdictions. It provides a platform that churches use to connect and communicate with their community members, record member service history, track online giving and perform a range of administrative functions.

One of the useful features of Pushpay’s technology is that it offers a livestreaming service so that the congregation can continue to stay connected with the church, despite everything that’s going on with COVID-19 and the related restrictions.

Pushpay continues to boast of growing operating leverage – its expense growth remains low but operating income is rising much faster. In the FY21 half-year result Pushpay announced that its earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) margin had improved from 17% to 31%.

Pushpay recently upgraded its EBTIDAF guidance, it’s now expecting EBITDAF to be in a range of US$56 million to US$60 million.

More reading

• 2 ASX shares that are growing rapidly
• 5 of the best ASX shares to buy in February
• 3 ASX growth shares to buy in February 2021
• 3 reasons why the Kogan.com (ASX:KGN) share price could be an opportunity
• These were the worst performing ASX 200 shares last week

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd and PUSHPAY FPO NZX. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Last week was one that investors will be in a hurry to forget. The S&P/ASX 200 Index (ASX: XJO) fell a disappointing 2.8% over the week to end it at 6,607.4 points.

Another busy week lies ahead, with plenty to keep investors on their toes. Here are five things to watch:

ASX futures pointing lower

The Australian share market looks set to start the week in the red after another poor night of trade on Wall Street on Friday. According to the latest SPI futures, the ASX 200 is expected to fall 34 points at the open. In the United States, the Dow Jones fell 2%, the S%P 500 dropped 1.9%, and the Nasdaq tumbled 2% lower. All three major indices dropped over 3% for the week. This was their worst weekly performance since October.

Reserve Bank meeting

On Tuesday the Reserve Bank of Australia will be holding its first meeting of the year and will discuss the cash rate. According to the latest cash rate futures, the market is pricing in a 75% probability of a cut to zero. This would be more bad news for income investors, who will potentially have to contend with even lower rate interest rates on savings accounts and term deposits.

Credit Corp kicks off earnings season

Earnings season kicks off next week with the release of the Credit Corp Group Limited (ASX: CCP) half year result. According to Morgans, the debt collection company is expected to deliver a strong result. Its analysts expect cash collections to be up 10% on the prior corresponding period and half year net profit to be up 2.5%. Though, the broker does see upside risk to its profit estimates.

Crown report

The Crown Resorts Ltd (ASX: CWN) share price could be on the move next week. After the market close on Friday, the casino and resorts operator announced that the New South Wales Independent Liquor and Gaming Authority (ILGA) has advised that on Monday it will receive the final report of the Bergin Inquiry into the suitability of Crown Resorts to hold the licence for Sydney’s Barangaroo casino. The ILGA board will then consider the report and make its decision.

REA Group half year update

The REA Group Limited (ASX: REA) share price will be on watch on Friday when it releases its half year results. According to a note out of Morgans, its analysts expect a largely flat result. The broker is forecasting a slight revenue decline due to the impact of the Melbourne shutdown impact, which will be offset by increased cost control.

More reading

• These were the best performing ASX 200 shares last week
• These were the worst performing ASX 200 shares last week
• ASX 200 ends 0.6% down, Kogan falls 8.5%, Service Stream soars 10%
• Brace for an IPO resurgence as new floats beat the ASX 200 by ~50%
• The latest ASX stocks to be hit by broker downgrades

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Crown Resorts Limited and REA Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There are some compelling reasons why you might want to think about Sezzle Inc (ASX: SZL) at this share price.

What’s Sezzle?

Sezzle describes itself as a rapidly growing fintech company on a mission to financially empower the next generation. It offers interest-free instalment plans at online stores and certain in-store locations.

The company claims that the increase in purchasing power for consumers leads to increased sales and basket sizes for the merchants that offer Sezzle.

It’s one of several buy now, pay later (BNPL) players on the ASX including Afterpay Ltd (ASX: APT), Zip Co Ltd (ASX: Z1P) and Splitit Ltd (ASX: SPT).

3 reasons to consider Sezzle at this share price

1: It has been declining

It’s better for investors to pay a lower price than a higher price for the same business.

Since 25 January 2021, the Sezzle share price has fallen by 9.5%. That’s a sizeable drop over such a short period of time.

Sezzle shares have also fallen by 29% since 28 August 2021, though that price peak was only for a short period of time.

As legendary investor Warren Buffett once said about share declines: “When hamburgers go down in price, we sing the Hallelujah Chorus in the Buffett household. When hamburgers go up in price, we weep. For most people, it’s the same with everything in life they will buy except stocks. When stocks go down and you can get more for your money, people don’t like them anymore.”

2: Delivering growth

Sezzle is one of the ASX shares that is delivering enormous revenue growth every quarter despite COVID-19 impacts.

It recently revealed its growth for the fourth quarter of 2020.

With underlying merchant sales (UMS), it said there was growth of 40.6% quarter on quarter and 205.4% year on year to US$320.8 million.

The average monthly UMS reached US$106.9 million, which was also an increase of 40.6% quarter on quarter and up 205.4% year on year.

Looking at Sezzle’s own income, merchant fees grew by 32.6% quarter on quarter and 195.6% year on year to US$17.2 million. However, the merchant fees as a percentage of UMS declined by 18 basis points year on year to 5.4%. The BNPL company says that is because it’s working with bigger merchants on slightly lower margins. 

The number of active consumers and active merchants increased significantly. The number of active consumers rose by 143.9% year on year to 2.23 million. Active merchants grew even quicker, rising by 166.6% to 26,690.

Sezzle reported that its active consumer repeat usage improved to 89.8%, which was up 75 basis points quarter on quarter and up 608 basis points year on year.

Sezzle executive Chair and CEO Charlie Youakim said: “Our efforts toward large enterprise merchants is paying dividends, as evidenced by our recent addition of GameStop and a number of mid-sized merchants such as UNTUCKit, Thursday Boots, Galls, Guidefitter and Pure Hockey.”

3: Exposure to the large addressable market of the US

Sezzle is focused on the US market, which has a much bigger population and addressable market than Australia. It has a sizeable market opportunity there.

Its instalment option went live in November with e-commerce platform Wix. The company’s integration is available to all Wix users in the US, Canada, India and in future regions as Sezzle expands.

However, the US is also where there is a lot of competition in the space from players like Afterpay. So the expansion into Canada and India maybe benefit the company over the long-term.

More reading

• Here’s why the Sezzle (ASX:SZL) share price is dropping lower
• ASX 200 drops 2%, IOOF and Afterpay shares sink, Bubs jumps
• Splitit (ASX:SPT) share price slides despite record quarter
• Zip and Vulcan were among the most traded ASX shares last week
• 2 ASX growth shares to buy in February

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Sezzle Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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There are some ASX shares that are growing revenue and profit rapidly.

Many investors look at revenue and profit growth as measures as how to value a business.

Here are two of the fastest-growing companies right now:

Temple & Webster Group Ltd (ASX: TPW)

Temple & Webster is an online-only furniture and homewares retailer. It has over 180,000 products on sale from hundreds of suppliers. It operates a drop-shipping model, where products are sent directly to customers from suppliers which enables faster delivery times and reducing inventory requirements and also allowing a larger product range.

The ASX share also has a private label range which is sourced directly by the company from overseas suppliers.

In FY20 the company achieved full year revenue growth of 74% to $176.3 million. As online shopping accelerated during the 2020 calendar year, so did Temple & Webster’s revenue. Second half revenue was up 96% and fourth quarter revenue went up by 130%. Active customers went up by 77%.

Earnings before interest, tax, depreciation and amortisation (EBITDA) went up by 483% to $8.5 million because of operational leverage. The adjusted EBITDA margin improved from 2.5% to 5.3%.

Management explained that the strong result, combined with the negative working capital nature of the business model allowed it to finish FY20 with $38.1 million of cash.  

The company said at its annual general meeting (AGM) that it’s making larger investments in areas such as technology and data, brand awareness and private label products. It can produce more content by having more creative resources. The ASX share said that the bigger it becomes, the better and stronger its customer proposition becomes, which it described as a virtuous cycle.

In terms of growth in FY21, the latest insight the market has is Temple & Webster’s trading update to 19 October 2020 which showed that revenue was up 138%. FY21 first quarter EBITDA was $8.6 million, which was more than the whole of FY20. October revenue growth was more than 100%. Temple & Webster’s contribution margin continued to run ahead of its 15% target.

Pushpay Holdings Ltd (ASX: PPH)

Pushpay is an ASX share that specialises in digital donation tools for large and medium US churches.

Growth has accelerated over the last 12 months during the COVID-19 pandemic.

In FY20 Pushpay reported that its operating revenue increased by 33% to US$127.5 million with total processing volume growing by 39% to US$5 billion.

In the FY21 half year result, operating revenue grew by another 51% to US$86.6 million. The ASX share said it expects to see continued revenue growth as the business executes on its strategy, achieves increased efficiencies and gains further market share in the US faith sector. Half-year total processing volume went up by 48% to US$3.2 billion.

Pushpay boasted that its diligent approach to optimising the gross margin continues to drive pleasing results. In the FY21 half-year result its gross margin improved from 65% to 68%.

Operating expenses only grew by 16% in the period, compared to operating revenue growth of 53%. Operating leverage improved because of the revenue growth, further margin improvements and disciplined cost management. Pushpay is expecting significant operating leverage to accrue as operating revenue continues to increase while total operating expense growth remains low.

In the half-year result, the earnings before interest, tax, depreciation, amortisation and foreign currency (EBITDAF) margin jumped from 17% to 31%. Net profit after tax (NPAT) went up 107% and operating cashflow rose 203%.

The ASX share recently increased its EBTIDAF guidance for FY21, to a range of US$56 million to US$60 million. This would represent an increase of more than 100% over the year.

At the current Pushpay share price, it’s valued at 20x FY23’s estimated earnings according to Commsec.

More reading

• 5 of the best ASX shares to buy in February
• 3 ASX growth shares to buy in February 2021
• Why the Temple & Webster (ASX:TPW) share price hit new highs last year
• 2 compelling ASX payment shares to buy
• Why Beach, Fortescue, Iluka, & Temple & Webster shares are dropping lower

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia has recommended Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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If you want to construct a balanced portfolio, having a few blue chip ASX shares in there would be a smart move.

But with so many to choose from, it can be hard to decide which ones to buy.

To narrow things down for you, I have highlighted two ASX blue chip shares that come highly rated:

BHP Group Ltd (ASX: BHP)

The first blue chip ASX share to look at is BHP. The Big Australian is one of the world’s largest miners and owns a diverse portfolio of world class and low cost operations across the globe.

BHP has exposure to a wide range of commodities, but chief among them is iron ore. Which certainly is a good thing right now with iron ore prices at such sky high levels. It is thanks largely to this that the company is being tipped to deliver a bumper profit result in FY 2021.

Ord Minnett is very positive on the mining giant and recently put a buy rating and $52.00 price target on its shares.

Its analysts believe the company is well-placed to outperform in the post-COVID environment. It expects this to lead to generous dividend payments.

Sonic Healthcare Limited (ASX: SHL)

Another blue chip to look at is Sonic Healthcare. It is a leading medical diagnostics company with operations across the world.

Sonic has been a very impressive performer in FY 2021. In October it released its first quarter update and revealed a 29% increase in revenue to $2,144 million and a massive 71% lift in EBITDA to $580 million.

This growth has been driven largely by strong demand for COVID-19 testing services. But also by positive performances across the rest of the business. 

Credit Suisse is a fan of the company. Earlier this month, the broker put an outperform rating and $39.00 price target on Sonic’s shares. It believes the company will outperform consensus estimates in FY 2021, especially if COVID-19 cases remain high globally and the strong demand for testing continues.

More reading

• Why the IGO (ASX:IGO) share price is tanking today
• Investment specialist: ASX to buckle in for the commodity bull market of a lifetime
• ASX 200 down 0.7%: BHP & Fortescue tumble, Reliance rockets, CSL downgraded
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• ASX 200 Weekly Wrap: Change in America spurs ASX 200 higher

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sonic Healthcare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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